SHANGHAI, Oct. 9 (SMM) – The SHFE market was closed during the Chinese National Day holiday. SHFE 1412 zinc contract prices opened at RMB 16,850/mt October 8, then soared to a monthly high of RMB 16,970/mt following LME zinc prices. But as a large number of longs left the market, SHFE 1412 zinc contract prices rolled back some early gains and closed at RMB 16,800/mt, up RMB 145/mt or 0.87%. Trading volumes decreased 22,348, to 136,598 lots, and total positions were up by 6,614 lots to 166,424 lots. SHFE 1412 zinc contract prices are expected to test support from the 60-day moving average.
#0 zinc prices were between RMB 16,990-17,030/mt, with spot premiums of RMB 200-230/mt against SHFE 1412 zinc contract prices. #1 zinc prices were between RMB 16,940-16,960/mt. SHFE 1412 zinc contract prices opened high but moved lower, hovering around RMB 16,800/mt, with spot discounts of #0 zinc between RMB 200-230/mt. Some smelters sold actively as zinc prices rose to RMB 17,000/mt, leading to sufficient supply. But traders held prices firm, leaving spot premiums high. Trading did not improve yesterday. Shuangyan branded #0 zinc prices were RMB 17,020-17,030/mt, and prices for Yuguang were RMB 17,010-17,020/mt. Baiyin, Jiulong, Qinxin and Qilin zinc prices were RMB 16,990-17,000/mt. Trading did not improve in the afternoon as SHFE zinc prices consolidated.
SMM surveyed 30 market players and found that 46% are reticent toward zinc price trends this week, believing LME zinc prices will hover between USD 2,310-2,340/mt, and SHFE 1412 zinc contract prices will move between RMB 16,700-16,950/mt. The market remains uncertain whether the Fed will raise its benchmark rate as Fed officials took a mixed posture. A stabilizing US dollar index will also constrain zinc price volatility. Total positions on the SHFE also decreased, and increasing supply will also weigh on zinc price gains.
37% are bullish, thinking LME zinc prices will rise to USD 2,360/mt, and SHFE 1412 zinc contract prices will breach RMB 17,000/mt. A falling US dollar index and upbeat US non-farm job report will bolster base metals. Weakening US stocks means an inflow of capital into the commodity market. A large number of mine closures overseas are also positive for zinc prices. Spot premiums against SHFE 1412 zinc contract prices are expected to remain around RMB 200/mt, which will also give support to zinc prices. In addition, an economic downturn pressure means additional stimulus measures by the PBOC, and this is expected to give incentive to zinc prices.
17% are pessimistic, believing LME zinc prices will fall below USD 2,300/mt, and SHFE 1412 zinc contract prices will test support from RMB 16,600/mt. The IMF lowered its forecast of economic growth in emerging markets by 0.2 percentage point to 4.4%, and lowered expectation 0.2 of global economic growth by percentage point to 4.0%. Disappointing economic indicators from China will also drag down base metals. SHFE zinc prices will thus meet resistance at RMB 17,000/mt. It was reported China may cancel export rebate for galvanized plate in early 2015, which will significantly impact downstream consumption.